The Initiative has produced some interesting material since they were formed a few years ago, and I often find what they write stimulating even when I don’t agree with them.

Like many, I’m signed up to receive the weekly newsletter. It usually has two or three brief pieces from staff on something or other that has been in the news that week, often overlapping with work the Initiative has been doing.

This week’s newsletter was a bit different. It has a piece from Roger Partridge, the chair of the Initiative, which can really only be described as a bit of a rant. Under the heading Immigration Grows the Pie he gets underway wanting to close down debate

Sadly, our island state is not enough to stop a vocal minority chanting their own exaggerated anti-immigration claims. In recent times, calls to halt immigration have focused on Auckland’s overheated housing market. But, as economic conditions softened last year, back came the protectionist clichés about immigrants stealing Kiwi jobs.

As it happens, we do agree on one thing. Partridge is responding to suggestions that immigration “takes away jobs”, and as I’ve argued for years, the demand effects of immigration typically exceed the supply effects in the short-run. In the short-term, if anything, immigration lowers unemployment, all else equal (also consistent with previous Reserve Bank research). In the longer term, immigration probably doesn’t make much difference to unemployment rates – labour market regulation, the welfare system etc determine that. So I agree with Partridge that

In a market economy, the number of jobs is not static. More migrants create more jobs. They mean more teachers, more retail staff, more factory workers, and more managers. In fact, more of almost everything.

But that isn’t the real question – it is one about whether New Zealanders, as a whole, benefit, in the form of higher incomes than they would otherwise earn.

Partridge then gets rather carried away with his enthusiasm

And that is not the end to the good news. Countless international studies have shown that increases in immigration not only tend to increase jobs, but also to increase the prosperity of the host nation. We benefit from their productive endeavours, their ingenuity and their diversity. And the more skilled the migrants, the greater the benefits.

That there are gains from immigration has received cross-party support in New Zealand since at least the 4th Labour Government. Let us hope the anti-immigration demagoguery falls on deaf ears. Going down that path we all lose.

The challenge is not keeping out the migrants; it is keeping out the bad ideas. Luckily, that does not need a wall, just clear thinking.

Well, we can debate the “countless international studies”. As I’ve pointed previously, plenty of studies actually show that in the last great age of globalization, immigration actually narrowed income differentials – incomes in the countries people were leaving rose relative to incomes in the countries they were coming to. Economic success – resulting from combination of better institutions, productivity shocks, or resources – enabled countries to support immigrants at no undue cost to themselves, and relieved (just a bit) a burden on the source countries (Ireland, Sweden, Italy, UK etc).

But, actually, my reading of the literature and international experience on immigration is really an “it depends”. Has immigration to Uruguay, Chile and Argentina benefited either side? Most immigrants came from Spain and Italy, and the destination countries have Spanish-shaped institutions etc. But income per head in all three Latin American settler countries is well below that in Italy and Spain – two of the less successful Western European countries. With hindsight, those immigrants probably should have stayed at home.

But our interest is surely New Zealand. Can Partridge produce a single study – let alone “countless” ones – that demonstrate that high rates of immigration have benefited New Zealand, whether in the post-war decades, or since the new National-Labour consensus developed at the end of the 1980s and early 1990s?

I’ve read pretty widely in the New Zealand literature and I’m not aware of any such studies. MBIE and Treasury, in their advice to ministers on immigration can’t point to such studies. Mai Chen’s recent taxpayer-supported “superdiversity” report couldn’t. There is a single paper around – a modelling exercise from 2009 – which purports to show such gains, but in fact it doesn’t. It can’t in fact – it is the sort of model that produces the answers you set it up to produce (something the authors recognize if not all the users).

There are simply no empirical studies demonstrating that one of the highest rates of immigration in the advanced world has actually produced any gains for New Zealanders as a whole (of course some gain, but many others lose, from (eg) the interaction of a distorted housing market and immigration policy, or the transfer between New Zealand diary workers and foreign ones). Our productivity is lousy (total factor productivity included), and the tradables sector struggles to produce a much per capita as it was doing 10-15 years ago. Our own people keep leaving. There is no simply evidence of any overall benefits for New Zealanders. I’d be inclined to agree with Partridge that skilled (and innovative) immigrants would be better than the alternative, but as I’ve illustrated previously (and here) most of the immigrants we get aren’t particularly skilled at all.

Partridge is, of course, quite correct that

That there are gains from immigration has received cross-party support in New Zealand since at least the 4th Labour Government

The political and bureaucratic elites have been at one on that. But there is simply no actual evidence, about specific developments in New Zealand in these few decades, that actually supports their belief about what our immigration policy would do for New Zealanders. Perhaps it was a reasonable policy to adopt 25 years ago – there was a lot of belief that New Zealand was about to flourish, and perhaps there would be plenty of gains to share around. But we haven’t flourished. We’ve languished, and it increasingly looks as though the migration policy was a misguided and perhaps quite damaging choice in our specific circumstances.

What New Zealand needs is some rigorous debate on the issues and evidence, not rather desperate attempts to simply rule any debate on immigration issues out of court.

Auckland council is planning next year, 2 weeks of Chinese New Year celebrations beyond the 3 days now being held in the domain in a couple of weeks. Horrors, all this holiday festivities would result in less productivity in traffic congestion and faces glued to windows from non productive workers having too much fun.

So you agree with Partridge that
In a market economy, more migrants create more jobs. They mean more teachers, more retail staff, more factory workers, and more managers. In fact, more of almost everything

Without further and better particulars, I’m un-convinced

Two questions not addressed

1. The jobs-list does not contain any mention of job-creators or industrial jobs, or manufacturing jobs
Factory workers could mean anything – including sweeping floors
Which implies there is a service-sector labour shortage or someone else has to create the jobs

2. Wouldn’t the “more jobs” claim be tied to the utilisation capacity of existing businesses and the extent of under-employment. It may well be many existing businesses could meet the new demand by working a night-shift during the week, a bit of overtime fir existing employees, without creating 1 additional job

Yes, but that is the relevance of the Rb research. Empirically, a shock to immigration (surprise increase) boosts overall pressure on resources in the domestic economy. (And, of course, the import share of GDP is around 305 not 60%)

Yes, I didn’t say anything about the “quality” of the jobs or industries. My point simply is that in the short-term new migrants typically mean more new demand than supply – and more demand (for goods and services) typically means more jobs. As my post the other day noted, I think that in the process the economy is further skewed away from the tradables sector, and its long-run prospects are impeded.

On your second point, yes it could happen, but empirical evidence does suggest that historically increases in immigration increase not just hours worked but also job numbers.

A short term demand boost followed by long term supply benefits/expanded labour force – sounds like a nice combination when thinking about return on capital employed or better still, return on equity. Perhaps “the whole” doesn’t benefit but you can see why the business sector is quite keen on keeping immigration as open as possible…..

Certainly for firms in the non-tradables sector. The ones in the tradables sector don’t seem to recognize the real exch rate implications, and the ones who never start (or grow) because of the exchange rate have no effective voice. They make better money by opening in the non-tradables sector instead – profit-maximizing for them (given the immigration policy framework), but not long-term income maximizing for NZ

My position on this has been made clear on this immigration topic which is your other favourite topic. There is no direct link that immigration is the cause. I point to failure in the administration of monetary policy. Nothing wrong with the system, it is the administration of that system. Various RB governors have been far too hawkish for far too long. Rapid interest rate rises is a painful adjustment decimating businesses. High interest rates burn margin, burn profits and burns equity. Interest rates must be looked at in a global context and that is the failure, we have run interest rates higher than what our major trading partners are doing.The RB and NZ economists for some strange reason do not view interest rates as a cost to business. They just think that it is a tool that they can use to whack a naughty student on the backside. It hurts but does not do damage. Well they had better start thinking of interest rate rises as a cleaver than just a big stick. When you use that cleaver, someone is going to get hurt and when you use that cleaver then you better have prepared bandages to stem the bleeding or the patient dies.

We are a nation born out of the necessity of immigration. When our immigration policy is largely a replacement policy no matter how much you point the finger at immigrants as the primary cause the argument consistently falls over. All of us have been migrants at one time. The population growth numbers by SNZ clearly shows that our population growth equates to the difference between natural birth and death.Immigration merely replaces Kiwis that have chosen to live elsewhere.

Pointing to countries like Japan and Germany that have larger and better economies makes no sense as they have had the population explosions followed by static and declining population that we never had.

Returning from a 2 week Goldcoast holiday, I can fully appreciate why our young prefer to go to Australia. It is the personal and career development opportunities offered. 12 million visitors, made up of 6 million foreign tourists with a permanent population of only 500k. This is what you are fighting against the pressures brought about by having too many migrants because amongst those 12 million visitors there would be many millions that would live and stay for more than 12 months in the Goldcoast which then reclassifies them from visitors to migrants as is SNZ definition of migrants.

I wrote my Insights piece before the Blackcaps had collapsed, so wasn’t feeling the need for a rant.

In any event, it is clear from you comments that we agree on the central argument of my short piece. That was to criticise the claims made throughout last year about immigration driving up unemployment by stealing Kiwi jobs, when the evidence that immigration tends to increase levels of employment (rather than take from a fixed pie).

On the prosperity point, your criticism that I can’t point to a single New Zealand study (let alone “countless” ones), is a false criticism, as nowhere do I claim to be able to. We both know there are none – which is why I refer to international ones.

Your examples of Uruguay, Chile and Argentina as countries where migrants have probably been worse off than if they’d stayed at home, is both (a) making a different point, and (b) probably guilty of the causation/correlation fallacy, as all three “host” countries you list have had long periods of political instability. They are hardly analogous to New Zealand – or the US, the source of most of the international research. In any event, I did not (and do not) claim it is an “invariable” rule. As I note, the international research is that immigration only “tends” to increase the prosperity of the host nation. And in New Zealand’s case, I do not doubt it is worthy of more study.

Thanks for taking the time to respond. I’d suggest that a lay reader of your post would not have appreciated that there are no New Zealand studies to support the proposition that post-war (or post 1990) immigration has been economically beneficial for NZers, but it is good that we are both agreed on that point.

I’m not going to defend the Chlle Uruguay and Argentina point at any length here – I’ll develop it in a later post – although if anything Chile has been more stable than Spain in the last 100 years. But in a sense that key point is one you appear to accept – we need to look carefully at the specifics of each case/country. Immigration can benefit “natives”,in some times and in some places, but it may not do so in others. To take a deliberately absurd example, it seems unlikely that relocating 20m Iraqis to Norway would lift the per capita incomes of Norwegians.

Careful thoughtful examination of New Zealand’s experience with immigration would be beneficial. I’ve argued that the Productivity Commission is an obvious candidate to do such work, but perhaps the Initiative might also want to think about putting it on your work programme?

Michael, unfortunately your unsubstantiated rhetoric on immigration as a negative to NZ feeds a hysterical crowd especially as that unsubstantiated rhetoric comes from a ex professional with the RBNZ. I actually can understand your strong feelings against migration even though you are a migrant yourself. I myself as a migrant sometimes do share a similar sentiment that our lives are being changed quite dramatically. But lets look at the facts instead of just blurring the facts with pretty charts that somehow links immigration to the productivity poverty of New Zealanders when 25% of New Zealanders are migrants perhaps even higher at 80%/90% in years past if you go back to the days of British colonisation.

Facts

1. New Zealands population growth is the difference between births and deaths ie by natural birth.

No amount of rhetoric that international students are allowed to get work visas and therefore push up migration numbers long term, on completion of their degrees change that fact. Not all international students would stay in NZ even when work visas or PR residency is issued.

2. Actual real migrants total 13,000 for the year and returning kiwis total 30,000 even though net migration totals 65,000 and that is even though the government targets 40,000 real migrants for the year the real incoming migrants only factually total 13,000 for the year.

3. Immigration policy is largely a replacement policy and that fact is borne out with population growth numbers. Therefore the logical conclusion is that immigration is not a NZ problem it is a Auckland problem. All the replacement migrants come through a single entry point, ie Auckland international airport. Wellington is a wannabe international airport but when it is majority 67% owned by a private company there is no real justification for the government or the Wellington taxpayer to be subsidising a private commercial companies profits with the taxpayer and the ratepayer taking all the risks. Christchurch? Oooops another 5.7 magnitude earthquake yesterday does not bode well for more infrastructure spending until the dust settles in perhaps another 10 years.

4. New migrants have access to more funds than us local “natives”. Unfortunately that is a reality we have to face up to, Auckland and New Zealand is increasingly is becoming part of the global interconnectedness. Travel time is shortening and getting really cheap. Air Asia coming in March has dropped airfares to many many destinations around the world from Auckland. We are actually fortunate most of that extra migrant funds so far is isolated to Auckland so that means that Kiwis still do have the rest of the country to buy at relatively cheap prices. Your comments of our distance from major markets increasingly dated as technology moves us closer to the rest of the world. But recently Air NZ upgraded all their aircraft to be able to fly into Queenstown safely. I did predict on your blog that Queenstown would come out as the 2nd alternative international airport and increasingly that prediction is being supported by improving aircraft tech.

Unsubstantiated rhetoric from a well respected professional can do extreme harm, eg the recent rejection of World reknown mathematics professionals because their daughter suffered some illness has resulted in the toughening of migrants to the extent beyond the usual NZ culture of reason. This is an example of mass hysteria in action.

You use the phrase “unsubstantiated rhetoric” twice, without any attempt to substantiate the assertion. I’ve put out huge amounts of material on this blog, and in earlier papers and internal discussion notes, articulating a hypothesis, and reasons to think that hypothesis has some merit. Perhaps I’m wrong – I’m quite open to the possibility – and if so I’d have thought it should have been relatively easy for the well-resourced agencies and academics to illustrate how and why.

And it isn’t me – but the chair of NZ’s leading economic think-tank – who is flinging round labels like “xenophobe” (or what the equivalient might be on the other side of the debate). This isn’t an issue for flamboyant rhetoric, but for reasoned analysis and debate, that engages with the stylized facts of New Zealand’s specific experience (including its continuing relative economic decline).

“I’d suggest that a lay reader of your post would not have appreciated that there are no New Zealand studies to support the proposition that post-war (or post 1990) immigration has been economically beneficial for NZers, ”

Michael, these are your own words. This does mean that both you and Roger agree that whatever linkage with NZ productivity poverty to immigration is unsubstantiated rhetoric?

No it doesn’t. Certainly from my perspective, and I’m sure from Roger’s, it means reasoned argument and debate, drawing on what literature there is here and abroad, and the stylized facts of NZ’s experience. That is how most public policy discussions, on most issues, proceed. Formal literature typically contributes to rather than resolves debate.

If you simply mean that there is no conclusive proof, well yes. That is the world we live in, around most difficult policy choices.

Anyway, the debate has actually not got past the fact that NZ population growth numbers equate to natural birth which means that immigration is mostly a replacement policy. What does replacement mean? It means ZERO population growth from immigration.

Lets focus on what the real concerns are.

1. Immigrants are buying and are prepared to pay higher prices for property which makes it difficult for FHB to get into the market.

Most of the buying activity is focused in Auckland which leaves the rest of NZ available for Kiwi buying activity. But all the employment is in Auckland, therefore the answer is simply to build more houses. But with viewshaft height limits surrounding vast areas of 57 sacred mounts we cannot build highrise buildings.

The Unitary plan will allow a second dwelling attached to a existing house on most of the residential zoning under the Unitary plan which means for an investor, almost all Auckland properties will allow for at the very least 2 separate incomes and in the 10 metropolitan cities potentially up to 18 levels of multiunit incomes. Any investor knows the smart money would still pile into Auckland for the simple reason that Auckland property will pay at least double the income in years to come. The rising cost of land is supported by the future revenue through higher density.

This problem arises because we have a preference for wealthier and more established migrants to replace poorer kiwis that depart for greener pastures in Australia or other countries. We do also specify $1.5 million and $10 million categories that get fast tracked migrant status. Perhaps we should only be looking at like for like. Poor kiwi gets replaced with a poor migrant? Rich kiwi gets replaced with a rich migrant. Or we could do what Germany has done in accepting 1 million refugees to replenish their falling population. Lets accept all these poor migrants so that we “natives” can feel better that we are helping these poor people and they can’t compete with us “natives” for jobs and property.

2. What about these poor migrant students that have wealthy parents that get a easy passes to kiwiship and have provided cheap labour creating a falling wage environment.

Perhaps we should just discourage the Universities from spending $2 billion dollars in the latest high tech equipment and the very best lecture halls and a fabulous learning environment? Who would pay for all this upgrade? The 80,000 fee paying students pay for all this upgrade, to pay for top lecturers and to pay for the best research facilities that only money can buy. The government has got more and more stingy, without fee paying students we would have to deal with falling masonry and daily computer breakdown and poor equipment.

3. Migrants look different. The reality is our largest and closest trading partners are Asian. Our largest export partner is now with China, may have dropped to 2nd with the drop in dairy prices but you need chinese/english speakers. I was in Beijing for 2 weeks and I had a big problem finding the local toilet because of language issues. Can you imagine running a kiwi business in China. If we want to do business in China we had better have more asians in our ranks. Or just simply say no more asians and we can just focus more on a white population. Have you walked into immigration office recently? They are all either asian or polynesian. Perhaps immigration has an asian/polynesian bias?

Or perhaps we had better realise that people are all the same and it does not matter where you come from and accept that we all originated from Africa before our ancestors trekked through the world and colour is a by product of climate and human adaptation.

That is the sort of study one could do. My thesis has been more about the pressure fairly rapid population growth puts on resources, in an economy with relatively moderate savings rates – in other words, the pressures that show up in high real interest rates and real exchange rates. My main thesis assumes that migrants are much like NZers.

But if one were to focus on your issues, one would probably focus on “what type of migrants”. Some might be highly productive and generate gains in innovation/productivity that benefit us all. Others might not. The data appear to suggest that we probably mostly get quite hardworking migrants, but not exceptionally skilled ones, and there is little sign (nothing eg in Mai Chen’s big book) suggesting that they are generating the spillover productivity growth that benefits the rest of us.

That shouldn’t really be surprising. The global picture historically has not been one that migrants benefit everyone else – they typically benefit themselves (a good thing) and those in the countries they leave behind (numerous studies illustrate this for the 19th C). Migrants typical flow towards economic success, rather than themselves generate that economic success.

Michael, we have already established that there is no rapid population growth from migration. Population growth in NZ is from natural birth and immigration replaces, Replacement equates to zero population growth from migration. Therefore the facts have already indicated that the first premise of your thesis is wrong. immigration is not a factor in driving up pressure on resources if your base assumption is that migrants are like NZs.

MHR comment: no we have most definitely not established that point. You assert it. I think it simply wrong.

Total population is growing rapidly, and would not be doing so without immigration policy (ie the movement of non-citizens). It is clearer the most recent one gets – natural increase has slowed materially in the 06 to 13 period.

I know you say that immigration is “just replacement” but over long periods (a) that hasn’t been true, and (b) even to the extent it was, there is no “just” about it. When your own people are leaving it is probably a useful signal that we shouldn’t be rushing to bring more other people in.

There are plenty of shrinking provincial towns in NZ. Population has declined in those towns and they are pleading for jobs with aging infrastructure and the government having to pay them whilst they spend their time as a rent a protest crowd. How is that sort of environment the best sort of environments to retain people?

Vibrant growing cities attract people. Not shrinking provincial towns. Thats why they call it rural drift. Whether we bring in migrants or not there is a natural drift towards a larger city. If we do not provide our youngsters with a vibrant and growing city then they just leave the country.

I’m not going to respond in detail, but just on your final para, colour isn’t (or shouldn’t be) the issue. I’ve been running the argument about post-war migration (mostly white, mostly Anglo) as well as the post 1990 patterns.

But do bear in mind that institutions seem to matter. Some countries/institutions/cultures – in combination with location/geography/natural resources, have proved capable of supporting much higher material living standards than others.

Remember, NZ had some of the very highest material living standards in the world for perhaps 50-70 years. We don’t now, and if anything the gaps are gradually widening. We need serious analysis and discussion about just why and what, if anything, can be done about it. That is the context for my arguments around the way in which immigration policy may have come to exacerbate our problems, in a way it didn’t (say) pre WW1.

NZ also had a dominant export market into a huge english market for its products. Perhaps when we lost market access when England dropped us from the preferential list of importers the adjustment has been rather painful?

Or being largely a agricultural based economy we have just very simply reached a limit in what our land can output?

Or interest rates resulting in a NZD set too high set by the RB over several decades as just too high damaging margin to our exporters?

Or you are actually advocating that we must allow our population shrink in order to have a higher productivity. Increasingly it appears that your argument is actually to allow population numbers to fall. Perhaps you should stop linking immigration with your arguments because it makes no sense and just call it restricting population size and preferably negative because of our distance from world markets?

Each possible hypotheses – I suspect the second has quite bit to it. That makes me suspect we’d be better off with a lower population, but I don’t regard population as something govts should target (up or down). People are, and should be, free to have as many children as they can afford, and NZ citizens of course should be free to go, come, and come back. I’m some mix of a classical liberal and a social conservative, so you are never going to find me advocating a population policy.

But immigration is a different matter – it involves people who, by defn, aren’t NZers, and we need to decide how open or not we want to be. It is a choice, and an inescapable one. But lets understand the implications of the choices we are making.

If you support the second hypothesis that our land is reached its limits in agricultural productivity then immigration or population growth really no linkage because we export most of our agricultural products. We do not consume it locally. Our domestic market for our agricultural product is practically non existent due to our small population. We are the world’s largest exporter of milk and not the largest consumer of milk.

Perhaps our more recent agricultural exports is harder and more costly to produce reducing our margin on product and therefore affecting our productivity. Don’t forget it is likely cheaper for sheep to eat grass and then butchered and exported versus a dairy farm that require high tech pumping stations, IT managers, computers, massive drier facilities to for dry powder milk that require engineers, electricians, administrators to export milk.

But in a sense that is the point of the argument. If we are land-constrained, we can’t grow many more exports, and prosperity comes generally through exports. So for a semi-fixed quantity of rural exports, plus whatever else we can sell, we might be better off spreading the fixed resource over a not-rapidly-increasing number of people.